Back to the Basics: Payment & Chinese Manufacturing

At the old house, I had a few posts from the “Back to the Basics” series. Basic info-type posts; for some it could be new, for grizzled importers, helpful reminders Here is the newest addition to the series; Payment and Chinese manufacturing.

Irregular paying and any action that could cause the supplier to focus more on payment than on your production is obviously not good. “Has the client made the wire? Will we get the balance?” Daily inquiries from the supplier to the buyer on the payment status… all of this takes energy away from the main thing – quality and timely production. You want to make the payment process such a breeze for the factory that their main job is focusing on the product.

(this post is not taking in to account quality contingencies and having assurance that production is up-to-speed as far as confirmed specs. This post is strictly focused on payment. Be vigilant to make sure your production is correct…that’s another post.)

Timely Payment: I’ve harped on this on previous posts but feel it necessary to continue to do so. Paying, on time and early will give you a world of favor with a Chinese vendor. This is particularly important in the world of promotional of products, because many times, you may be producing orders of lower volume….lower quantity. Orders that are not real robust in dollar value. Orders, that if the factory did not receive, they would not shed a tear or lose any sleep (a US$20,000 order may be big to you, is it big to this particular factory? What percentage of their yearly business is your business?)

But, the order is important to you and the ball is in your court to show sincerity for the importance of the order..at least as far as the factory is concerned.

By making your payment with relative ease and getting that deposit in to the factory’s hands, you are already depleting half of the worry factor from the factory that you may be a problematic customer. A good customer to the factory is one they can get on the production line and out the door at a relative painless rate. Not too much tug-of-war.

With a timely payment, the factory will extend favor and keep a solution-oriented mind on your project. A consideration that they may not be so willing to implement if you are a customer they always have to chase down for their payment.

I can attest to this concept; managing the array of promotional product campaigns that we do, not every order breaks the bank, but it’s worth doing and our factories are willing to help if we’re known as prompt payers.

Payment & Delivery Time Correlation: Know your vendor’s payment terms. Delivery time is always of super importance. When will the factory release the goods? Is that based on you paying the balance payment? Keep in mind that just because you paid the balance payment, there may be another chunk of days for factory departure, transit to the port, closing date and sailing date. Complicated, huh? Many variables involved when moving merchandise. You don’t want your payment to be a roadblock to success. Keep a moving map knowing how payment comes in to play; “when does the factory need the payment to hit the sailing date? If I pay next week, will we still have time to deliver?”

Payment & Order Initiation or Factory Departure: I’ve seen it a multitude of times; buyer issues a purchase order and thinks the factory started production. Factory receives the purchase order and waits for the buyer’s payment to start production. A few days to an entire week can pass. Buyer emails the factory asking how the order is going, the factory then lets the wind out of their sails by letting them know the balance is still pending and they’re waiting to receive before shipment.

A Factory Has Enough Cares, Don’t Make Your Payment Another One

This lack of communication and elementary assumption could blow the whole lead time plan. Unless you’ve done quite a bit of repeat business with one vendor; deposit payment initiates an order, not a purchase order.

Your Responsibility: Make paying the supplier your responsibility; don’t wait for the factory to inform you. In fact, the Chinese vendor may even be bashful to talk about such a matter (cultural issue). They would rather avoid an “awkward situation” than to inform you the balance is needed to ship on time (to heck with the situation, you’d want to know and delivery time comes first…but the vendor would prefer not to “embarrass” you). Be in charge of the “when factor” of your deposit and balance. The factory will think that if you wanted the goods on time, you would have paid on time

I realize that terms and timing has been a point of contention between buyer and seller since the beginning of time. My goal in this post isn’t to eradicate theses issues but to inform you that by playing your part correctly these issues will start to shrink. If a smoother and upfront payment process allows a factory, across the world in China, to better produce your order and decrease the oh-so-common errors that can come from Chinese factories (especially in the fast-paced world of Promotional Products) – then why not take these steps? Seems to be a no-brainer…

About Jacob

For 17 years, I’ve worked in China manufacturing. This blog is about sourcing, RFQ's, order control and logistics. I lived in China from ’01 to ’12 and now on the North Carolina coast. I continue to work in China imports, private label and learning FBA and ecommerce.

Use My 17 Years of China Manufacturing Experience!

Let me help you manage your China import projects. I'm talking about project management and working in your best interest, not trying to sell you something or mark something up. I can consult you and your team on order management. Use my China network on your behalf. Or I can share how I started my private label and started moving product on Amazon.

I moved to China in 2001 and started my manufacturing career. Today I live on the East Coast of the USA and continue to manage orders and grow my own private label business. I've manufactured for large brands. I've imported any product under the sun with a heavy focus on promotional and houseware items.